FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of May 2006
EXCEL MARITIME CARRIERS LTD
(Translation of registrant's name into English)
17th Km National Road Athens - Lamia & Finikos Street
Nea Kifisia, 145-64
Athens
Greece
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
----- -----
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
----- -----
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Attached hereto as Exhibit 99.1 are the audited consolidated financial
statements of Excel Maritime Carriers Ltd. (the "Company") as of December 31,
2005.
ADDITIONAL INFORMATION
The Company files annual reports on Form 20-F (File No. 1-10137) and periodic
reports on Form 6-K with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934.
Exhibit 99.1
EXCEL MARITIME CARRIERS LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets as of December 31, 2004 and 2005 F-3
Consolidated Statements of Income for the years ended
December 31, 2003, 2004 and 2005 F-4
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 2003, 2004 and 2005 F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 2003, 2004 and 2005 F-6
Notes to Consolidated Financial Statements F-7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders of EXCEL MARITIME CARRIERS LTD.
We have audited the accompanying consolidated balance sheets of Excel Maritime
Carriers Ltd. (the "Company"), as of December 31, 2004 and 2005 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 2005. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Excel Maritime
Carriers Ltd. at December 31, 2004 and 2005 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2005 in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.
Athens, Greece,
April 19, 2006
EXCEL MARITIME CARRIERS LTD.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2005
(Expressed in thousands of U.S. Dollars - except for share and per share data)
ASSETS 2004 2005
------ ---- ----
CURRENT ASSETS:
Cash and cash equivalents 64,903 58,492
Restricted cash 2,493 7,988
Accounts receivable trade, net 2,302 1,185
Accounts receivable, other 158 799
Due from related parties (Note 3) - 255
Inventories (Note 4) 558 1,094
Prepayments and advances 962 734
---------- ---------
Total current assets 71,376 70,547
---------- ---------
FIXED ASSETS:
Advances for vessels acquisition (Note 5) 26,220 -
Vessels, net (Note 6) 14,615 465,668
Office furniture and equipment - 524
---------- ---------
Total fixed assets, net 40,835 466,192
---------- ---------
OTHER NON CURRENT ASSETS:
Goodwill 400 400
Deferred charges, net (Note 7) 1,386 1,604
Restricted cash - 22,282
---------- ---------
Total assets 113,997 561,025
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt, net of
deferred financing fees (Note 8) 7,704 41,230
Accounts payable 1,262 3,307
Deferred revenue - 1,893
Accrued liabilities 1,600 5,020
---------- ---------
Total current liabilities 10,566 51,450
---------- ---------
LONG-TERM DEBT, net of current portion and net
of deferred financing fees (Note 8) 5,616 221,586
---------- ---------
COMMITMENTS AND CONTINGENCIES (Note 11) - -
---------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.1 par value:
5,000,000 shares authorized, none issued - -
Common stock, $0.01 par value; 49,000,000
Class A shares and 1,000,000 Class B
shares authorized; 13,696,153 Class A shares
and 114,946 Class B shares, issued
and outstanding at December 31, 2004 19,595,153
Class A shares and 114,946 Class B shares issued
and outstanding at December 31, 2005 (Note 9) 138 197
Additional paid-in capital (Note 9) 63,738 181,265
Shares to be issued ( 298,403 Class A shares) (Note 3) - 6,853
Due from a related party (Note 3) - (2,024)
Retained earnings 34,128 101,887
---------- ---------
98,004 288,178
Less: Treasury stock, 78,650 Class A shares and
588 Class B shares at December 31, 2004 and
December 31, 2005 (189) (189)
---------- ---------
Total stockholders' equity 97,815 287,989
---------- ---------
Total liabilities and stockholders' equity 113,997 561,025
========== =========
The accompanying notes are an integral part of these consolidated statements.
EXCEL MARITIME CARRIERS LTD.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
(Expressed in thousands of U.S Dollars-except for share and per share data)
2003 2004 2005
------------- ------------- --------------
REVENUES:
Voyage revenues (Note 1) 26,094 51,966 118,082
Revenue from managing related party vessels (Note 3) 527 637 522
------------- ------------- --------------
26,621 52,603 118,604
------------- ------------- --------------
EXPENSES:
Voyage expenses (Note 13) 7,312 8,100 11,693
Voyage expenses - related party (Note 13) - - 1,412
Vessel operating expenses (Note 13) 6,529 7,518 24,215
Vessel Depreciation (Note 6) 993 980 20,092
Amortization of deferred dry-docking and special
survey costs (Note 7) 555 733 622
Contract termination expense - related party
(Note 3) - - 4,963
Management fees - related party (Note 3) 260 270 -
General and administrative expenses 1,772 2,867 6,520
------------- ------------- --------------
17,421 20,468 69,517
------------- ------------- --------------
GAIN ON SALE OF VESSELS (Note 6) - - 26,795
Operating income 9,200 32,135 75,882
OTHER INCOME (EXPENSES):
Interest and finance costs (Notes 8 and 14) (473) (363) (10,259)
Interest income 12 302 2,381
Other, net (94) (24) 66
------------- ------------- --------------
Total other income (expenses), net (555) (85) (7,812)
------------- ------------- --------------
Net income, before taxes 8,645 32,050 68,070
------------- ------------- --------------
U.S. Source Income taxes (Note 12) - - (311)
------------- ------------- --------------
Net income, after taxes 8,645 32,050 67,759
============= ============= ==============
Earnings per common share, basic and diluted 0.75 2.75 3.64
============= ============= ==============
Weighted average number of shares, basic and diluted 11,532,725 11,640,058 18,599,876
============= ============= ==============
The accompanying notes are an integral part of these consolidated statements.
EXCEL MARITIME CARRIERS LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
2003, 2004 and 2005 (Expressed in thousands of U.S. Dollars - except for share data)
Common Stock
------------------------
Additional Shares
Comprehensive # of Par Paid-in Retained to be
Income Shares Value Capital Earnings Issued
------------- ----------- -------- --------- ---------- --------
BALANCE, December 31, 2002 11,611,099 116 12,087 (6,567) -
- Net income 8,645 - - - 8,645 -
- Sale of treasury stock - - - - -
-----------
Comprehensive income 8,645
----------- ------------ --------- --------- ---------- ---------
BALANCE, December 31, 2003 11,611,099 116 12,087 2,078 -
- Net income 32,050 - - - 32,050 -
- Issuance of common stock 2,200,000 22 54,978 - -
- Expenses relating to the issuance
of common stock - - (3,549) - -
- Stock based compensation expense - - 222 - -
-----------
Comprehensive income 32,050
----------- ------------ --------- --------- ---------- ---------
BALANCE, December 31, 2004 13,811,099 138 63,738 34,128 -
- Net income 67,759 - - - 67,759 -
- Issuance of common stock 5,899,000 59 123,820 - -
- Expenses relating to the issuance
of common stock - - (7,375) - -
- Stock based compensation expense - - 948 - -
-----------
Comprehensive income 67,759
===========
- Contract Termination - - 134 - 6,853
- Due from a related party - - - - -
------------ --------- --------- ---------- ---------
BALANCE, December 31, 2005 19,710,099 197 181,265 101,887 6,853
============ ========= ========= ========= ==========
Total
Due from a Treasury Stockholders'
related party Total Stock Equity
-------------- -------- --------- ------------
BALANCE, December 31, 2002 - 5,636 (187) 5,449
- Net income - 8,645 - 8,645
- Sale of treasury stock - - (2) (2)
Comprehensive income
---------- --------- -------- ----------
BALANCE, December 31, 2003 - 14,281 (189) 14,092
- Net income - 32,050 - 32,050
- Issuance of common stock - 55,000 - 55,000
- Expenses relating to the issuance
of common stock - (3,549) - (3,549)
- Stock based compensation expense - 222 - 222
---------- --------- -------- ----------
Comprehensive income
BALANCE, December 31, 2004 - 98,004 (189) 97,815
- Net income - 67,759 - 67,759
- Issuance of common stock - 123,879 - 123,879
- Expenses relating to the issuance
of common stock - (7,375) - (7,375)
- Stock based compensation expense - 948 - 948
Comprehensive income
- Contract Termination - 6,987 - 6,987
- Due from a related party (2,024) (2,024) - (2,024)
---------- --------- -------- ----------
BALANCE, December 31, 2005 (2,024) 288,178 (189) 287,989
========= ========= ======== ==========
The accompanying notes are an integral part of these consolidated statements.
EXCEL MARITIME CARRIERS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
(Expressed in thousands of U.S Dollars)
2003 2004 2005
---- ---- ----
Cash Flows from Operating Activities:
Net income, after taxes 8,645 32,050 67,759
Adjustments to reconcile net income to net cash
provided by operating activities:
Vessel Depreciation 993 980 20,092
Amortization of deferred dry-docking and
special survey costs 555 733 622
Amortization and write-off of deferred
financing costs 39 39 526
Gain on sale of vessels - - (26,795)
Contract termination expense - - 4,963
Stock-based compensation expense - 222 948
Changes in operating assets and liabilities:
Accounts receivable (361) (1,546) 221
Inventories 60 (46) (536)
Prepayments and advances (58) (821) 228
Accounts payable (486) 328 2,045
Accrued liabilities 451 638 3,420
Deferred revenue - - 1,893
Payments for dry-docking and special survey (951) (544) (1,747)
-------------- --------------- -----------
Net Cash provided by Operating Activities 8,887 32,033 73,639
-------------- --------------- -----------
Cash Flows from Investing Activities:
Advances for vessels acquisitions - (26,220) -
Additions to vessel cost - - (454,241)
Proceeds from sale of vessels - - 37,022
Office, furniture and equipment - - (524)
-------------- --------------- -----------
Net Cash used in Investing Activities - (26,220) (417,743)
-------------- --------------- -----------
Cash Flows from Financing Activities:
Increase in restricted cash (914) (1,579) (27,777)
Proceeds from long-term debt - 7,750 282,415
Principal payments of long-term debt (5,960) (2,300) (31,530)
Treasury stock (2) - -
Issuance of common stock, net of related
issuance costs - 51,451 116,504
Payment of financing costs (2) (190) (1,919)
-------------- --------------- -----------
Net Cash provided by (used in) Financing Activities (6,878) 55,132 337,693
-------------- --------------- -----------
Net increase (decrease) in cash and cash equivalents 2,009 60,945 (6,411)
Cash and cash equivalents at beginning of year 1,949 3,958 64,903
-------------- --------------- -----------
Cash and cash equivalents at end of year 3,958 64,903 58,492
============== =============== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest payments 480 242 8,872
============== =============== ===========
The accompanying notes are an integral part of these consolidated statements.
EXCEL MARITIME CARRIERS LTD.
Notes to the Consolidated Financial Statements
(Expressed in thousands of United States Dollars - except for share and per
share data, unless otherwise stated)
1. Basis of Presentation and General Information:
The accompanying consolidated financial statements include the accounts of
Excel Maritime Carriers Ltd. and its wholly owned subsidiaries
(collectively, the "Company" or "Excel"). Excel was formed in 1988, under
the laws of the Republic of Liberia. On March 21, 2005 the Company issued
and sold 5,899,000 shares of Class A common stock, registered under its
shelf registration statement, to institutional investors (Note 9). The net
proceeds totaled $116,504 and were used to partly finance the acquisition
cost of sixteen second hand vessels which were delivered to the Company
through December 31, 2005.
The Company is engaged in the ocean transportation of dry bulk cargoes
worldwide through the ownership and operation of bulk carrier vessels and
is the sole owner of all outstanding shares of the following subsidiaries:
Ship-owning companies with vessels in operation at December 31, 2005
Company Country of incorporation Date of incorporation Vessel-owned
-------- ------------------------ --------------------- ------------
1. Centel Shipping Co. Ltd. ("Centel") Cyprus May 2002 Lady
2. Snapper Marine Ltd. ("Snapper") Liberia June 2004 Marybelle
3. Pisces Shipholding Ltd. ("Pisces") Liberia June 2004 Goldmar
4. Liegh Jane Navigation S.A. ("Liegh") Liberia July 2004 Swift
5. Teagan Shipholding S.A. ("Teagan") Liberia November 2004 First Endeavour
6. Fianna Navigation S.A. ("Fianna") Liberia November 2004 Isminaki
7. Ingram Limited ("Ingram") Liberia November 2004 Emerald
8. Whitelaw Enterprises Co. ("Whitelaw") Liberia November 2004 Birthday
9. Castalia Services Ltd. ("Castalia") Liberia November 2004 Princess I
10. Yasmine International Inc. ("Yasmine") Liberia January 2005 Elinakos
11. Candy Enterprises Inc. ("Candy") Liberia February 2005 Renuar
12. Barland Holdings Inc. ("Barland") Liberia February 2005 Attractive
13. Fountain Services Ltd. ("Fountain") Liberia February 2005 Powerful
14. Amanda Enterprises Ltd. ("Amanda") Liberia March 2005 Happy Day
15. Marias Trading Inc. ("Marias") Liberia March 2005 Angela Star
16. Tanaka Services Ltd. ("Tanaka") Liberia March 2005 Rodon
17. Harvey Development Corp. ("Harvey") Liberia March 2005 Fortezza
Ship-owning companies with vessels sold during the year ended December 31, 2005
Company Country of incorporation Date of incorporation Vessel-owned
-------- ------------------------ --------------------- ------------
18. Becalm Shipping Co. Ltd. ("Becalm") Cyprus July 1998 Fighting Lady
19. Tortola Shipping Co. Ltd. ("Tortola") Cyprus July 1998 Lucky Lady
20. Storler Shipping Co. Ltd. ("Storler") Cyprus August 1998 Petalis
21. Madlex Shipping Co. Ltd. ("Madlex") Cyprus January 1999 Almar I
Companies established to acquire vessels
Company Country of incorporation Date of incorporation
-------- ------------------------ ---------------------
22. Magalie Investments Corp.("Magalie") Liberia March 2005 -
23. Melba Management Ltd. ("Melba") Liberia April 2005 -
24. Minta Holdings S.A. ("Minta") Liberia April 2005 -
25. Odell International Ltd. ("Odell") Liberia April 2005 -
26. Naia Development Corp. ("Naia") Liberia April 2005 -
Other group companies
Company Country of incorporation Date of incorporation Activity
Management
27. Maryville Maritime Inc. ("Maryville") Liberia August 1983 company
Holding company
28. Point Holdings Ltd. ("Point") Liberia February 1998
Effective January 1, 2005 and following the termination of an agreement
with Excel Management Ltd, an affiliated corporation (Note 3), the
operations of the vessels are directly managed by Maryville which provides
the vessels with a wide range of shipping management services, such as
technical support and maintenance, supervision of new buildings, insurance
consulting, chartering, financial and accounting services. The fees charged
by Maryville for the management of the Company's fleet, are eliminated for
consolidation purposes in the accompanying consolidated statements of
income.
Charterers individually accounting for more than 10% of the Company's
voyage revenues during the years ended December 31, 2003, 2004 and 2005,
are as follows:
Charterer 2003 2004 2005
---------- ----- ------ -----
Malissa SCTT 25% 15% -
Swissmarine-Geneva 11% - -
Oldendorff Carriers GMBH 11% - -
Noble Shipping Inc. Hong Kong 10% - -
Transfield Er Capeltd BV - 12% -
Ncs North China Shipping Co Ltd BVI - 10% -
Daeyang Shipping Co Ltd. - - 12%
2. Significant Accounting Policies:
(a) Principles of Consolidation: The accompanying consolidated financial
statements have been prepared in accordance with U.S. generally
accepted accounting principles and include the accounts and operating
results of Excel Maritime Carriers Ltd. and its wholly-owned
subsidiaries referred to in Note 1 above. All significant
inter-company balances and transactions have been eliminated in
consolidation.
(b) Use of Estimates: The preparation of consolidated financial statements
in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(c) Other Comprehensive Income: The Company follows the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income", which requires separate presentation
of certain transactions, which are recorded directly as components of
stockholders' equity. The Company has no such transactions which
affect comprehensive income and, accordingly, comprehensive income
equals net income for all periods presented.
(d) Concentration of Credit Risk: Financial instruments, which potentially
subject the Company to significant concentrations of credit risk,
consist principally of cash and cash equivalents and trade accounts
receivable. The Company places its cash and cash equivalents,
consisting mostly of deposits, with high credit qualified financial
institutions. The Company performs periodic evaluations of the
relative credit standing of those financial institutions. The Company
limits its credit risk with accounts receivable by performing ongoing
credit evaluations of its customers' financial condition. The Company
does not obtain rights to collateral to reduce its credit risk.
(e) Foreign Currency Translation: The functional currency of the Company
is the U.S. Dollar because the Company's vessels operate in
international shipping markets, and therefore primarily transact
business in U.S. Dollars. The Company's books of accounts are
maintained in U.S. Dollars. Transactions involving other currencies
during the year are converted into U.S. Dollars using the exchange
rates in effect at the time of the transactions. At the balance sheet
dates, monetary assets and liabilities, which are denominated in other
currencies, are translated into U.S. Dollars at the year-end exchange
rates. Resulting gains or losses are included in general and
administrative expenses in the accompanying consolidated statements of
income.
(f) Cash and Cash Equivalents: The Company considers highly liquid
investments such as time deposits and certificates of deposit with an
original maturity of three months or less to be cash equivalents.
(g) Restricted Cash: Restricted cash includes bank deposits that are
required under the Company's borrowing arrangements which are used to
fund the loan installments coming due. The funds can only be used for
the purposes of loan repayment. In addition, restricted cash also
includes minimum cash deposits required to be maintained with certain
banks under the Company's borrowing arrangements.
(h) Accounts Receivable-Trade, net: The amount shown as accounts
receivable-trade, net at each balance sheet date, includes receivables
from charterers for hire, freight and demurrage billings, net of a
provision for doubtful accounts. At each balance sheet date, all
potentially uncollectible accounts are assessed individually for
purposes of determining the appropriate provision for doubtful
accounts. The provision for doubtful accounts at December 31, 2004 and
2005 was $25 and $274, respectively.
(i) Insurance Claims: The Company records insurance claim recoveries for
insured losses incurred on damage to fixed assets. Insurance claim
recoveries are recorded, net of any deductible amounts, at the time
the Company's fixed assets suffer insured damages and the Company can
make an estimate of the amount to be reimbursed following the
insurance claim.
(j) Inventories: Inventories consist of consumable bunkers, lubricants and
victualling stores, which are stated at the lower of cost or market
value. Cost is determined by the first in, first out method.
(k) Vessels, net: Vessels are stated at cost, which consists of the
contract price and any material expenses incurred upon acquisition
(initial repairs, improvements, delivery expenses and other
expenditures to prepare the vessel for her initial voyage). Subsequent
expenditures for conversions and major improvements are also
capitalized when they appreciably extend the life, increase the
earning capacity or improve the efficiency or safety of the vessels.
Otherwise these amounts are charged to expense as incurred.
The cost of each of the Company's vessels is depreciated beginning
when the vessel is ready for its intended use, on a straight-line
basis over the vessel's remaining economic useful life, after
considering the estimated residual value (vessel's residual value is
equal to the product of its lightweight tonnage and estimated scrap
rate). Management estimates the useful life of the Company's vessels
to be 28 years from the date of initial delivery from the shipyard.
However, when regulations place limitations over the ability of a
vessel to trade on a worldwide basis, its remaining useful life is
adjusted at the date such regulations become effective.
(l) Prepaid/Deferred charter revenue: Where the Company identifies any
assets or liabilities associated with the acquisition of a vessel, the
Company records all such identified assets or liabilities at fair
value. Fair value is determined by reference to market data. The
Company values any asset or liability arising from the market value of
the time charters assumed when a vessel is acquired. The amount to be
recorded as an asset or liability at the date of vessel delivery is
based on the difference between the current fair value of a charter
with similar characteristics as the time charter assumed and the net
present value of future contractual cash flows from the time charter
contract assumed. When the present value of the time charter assumed
is greater than the current fair value of such charter, the difference
is recorded as prepaid charter revenue. When the opposite situation
occurs, the difference is recorded as deferred revenue. Such assets
and liabilities, respectively, are amortized as a reduction of, or an
increase in, revenue over the period of the time charter assumed.
(m) Impairment of Long-Lived Assets: The Company uses SFAS 144 "Accounting
for the Impairment or Disposal of Long-lived Assets", which addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets. The standard requires that, long-lived assets and
certain identifiable intangibles held and used or disposed of by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not
be recoverable. An impairment loss for an asset held for use should be
recognized when the estimate of undiscounted cash flows, excluding
interest charges, expected to be generated by the use of the asset is
less than its carrying amount. Measurement of the impairment loss is
based on the fair value of the asset as provided by independent marine
valuers. In this respect, management regularly reviews the carrying
amount of the vessels in connection with the estimated recoverable
amount for each of the Company's vessels. Furthermore, in the period a
long-lived asset meets the "held for sale" criteria of SFAS No. 144, a
loss is recognized for any reduction of the long-lived asset's
carrying amount to its fair value less cost to sell. No impairment
loss was recorded in the years ended December 31, 2003, 2004 and 2005.
(n) Accounting for Dry-Docking and Special Survey Costs: The Company
follows the deferral method of accounting for dry-docking and special
survey costs whereby actual costs incurred are deferred and are
amortized on a straight-line basis over the period through the date
the next dry-docking and special survey are scheduled to become due.
Unamortized dry-docking and special survey costs of vessels that are
sold are written off at the time of the respective vessels' sale and
are included in the calculation of the resulting gain or loss from
such sale.
(o) Financing Costs: Fees paid to lenders for obtaining loans are recorded
as a contra to debt. Such fees are deferred and amortized to interest
and finance costs over the life of the related debt using the
effective interest method. Unamortized fees relating to loans repaid
or refinanced are expensed as interest and finance costs in the period
the repayment or refinancing is made.
(p) Accounting for Revenues and Related Expenses: The Company generates
its revenues from charterers for the charterhire of its vessels.
Vessels are chartered using either voyage charters, where a contract
is made in the spot market for the use of a vessel for a specific
voyage for a specified charter rate, or time charters, where a
contract is entered into for the use of a vessel for a specific period
of time and a specified daily charterhire rate. If a charter agreement
exists and collection of the related revenue is reasonably assured,
revenue is recognized, as it is earned ratably over the duration of
the period of each voyage or time charter. A voyage is deemed to
commence upon the completion of discharge of the vessel's previous
cargo and is deemed to end upon the completion of discharge of the
current cargo.
Demurrage income represents payments by the charterer to the vessel
owner when loading or discharging time exceeded the stipulated time in
the voyage charter and is recognized as it is earned ratably over the
duration of the period of each voyage charter.
Deferred revenue includes cash received prior to the balance sheet
date and is related to revenue earned after such date. Voyage
expenses, primarily consisting of port, canal and bunker expenses that
are unique to a particular charter, are paid for by the charterer
under the time charter arrangements or by the Company under voyage
charter arrangements, except for commissions, which are always paid
for by the Company, regardless of charter type. All voyage and vessel
operating expenses are expensed as incurred, except for commissions.
Commissions paid to brokers are deferred and amortized over the
related voyage charter period to the extent revenue has been deferred
since commissions are earned as the Company's revenues are earned.
(q) Repairs and Maintenance: All repair and maintenance expenses including
underwater inspection expenses are expensed in the year incurred and
are included in Vessel operating expenses in the accompanying
consolidated statements of income.
(r) Staff leaving Indemnities- Administrative personnel: The Company's
employees are entitled to termination payments in the event of
dismissal or retirement with the amount of payment varying in relation
to the employee's compensation, length of service and manner of
termination (dismissed or retired). Employees who resign, or are
dismissed with cause are not entitled to termination payments. The
Company's liability on an actuarially determined basis, at December
31, 2004 and 2005 amounted to approximately $237 and $249,
respectively.
(s) Earnings per Common Share: Basic earnings per common share are
computed by dividing net income available to common stockholders by
the weighted average number of common shares outstanding during the
year. Diluted earnings per common share, reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised. The Company had no dilutive securities
during the years ended December 31, 2003, 2004 and 2005.
(t) Segment Reporting: The Company reports financial information and
evaluates its operations by charter revenues and not by the length of
ship employment for its customers, i.e. spot or time charters. The
Company does not use discrete financial information to evaluate the
operating results for each such type of charter. Although revenue can
be identified for these types of charters, management cannot and does
not identify expenses, profitability or other financial information
for these charters. As a result, management, including the chief
operating decision maker, reviews operating results solely by revenue
per day and operating results of the fleet and thus the Company has
determined that it operates under one reportable segment. Furthermore,
when the Company charters a vessel to a charterer, the charterer is
free to trade the vessel worldwide and, as a result, the disclosure of
geographic information is impracticable.
(u) Variable Interest Entities: In December 2003, the FASB issued
Interpretation No. 46R, Consolidation of Variable Interest Entities,
an Interpretation of ARB No. 51 (the "Interpretation"), which revised
Interpretation No. 46, issued in January 2003. The Interpretation
addresses the consolidation of business enterprises (variable interest
entities) to which the usual condition (ownership of a majority voting
interest) of consolidation does not apply. The Interpretation focuses
on financial interests that indicate control. It concludes that in the
absence of clear control through voting interests, a company's
exposure (variable interest) to the economic risks and potential
rewards from the variable interest entity's assets and activities are
the best evidence of control. Variable interests are rights and
obligations that convey economic gains or losses from changes in the
value of the variable interest entity's assets and liabilities.
Variable interests may arise from financial instruments, service
contracts, and other arrangements. If an enterprise holds a majority
of the variable interests of an entity, it would be considered the
primary beneficiary. The primary beneficiary would be required to
include assets, liabilities, and the results of operations of the
variable interest's entity in its financial statements. The Company
was required to adopt the provisions of FIN 46R for entities created
prior to February 2003, in 2004. The adoption of FIN 46R in 2004 and
2005 did not have any impact on the Company's consolidated financial
position, results of operations or cash flows.
(v) Accounting for Stock-Based Compensation: In October 2004, the
Company's Board of Directors approved a Stock Option Plan providing
for granting of stock options to the Company's Chief Executive
Officer. Prior to October 2004, the Company had not issued stock-based
compensation to its employees. The Company accounts for employee
stock-based compensation in accordance with the provisions of SFAS No.
123 using the fair value method wherein the fair value of such awards
are determined on the grant date and recognized as compensation
expense in the consolidated statements of income over the vesting
period of the options.
(w) Recent Accounting Pronouncements:
SFAS No. 123(R): On December 16, 2004, the Financial Accounting
Standards Board (FASB) issued FASB Statement No. 123 (revised 2004),
"Share-Based Payment" (SFAS No. 123(R)), which is a revision of FASB
Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS No.
123). SFAS No. 123(R) supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and amends FASB Statement No. 95,
"Statement of Cash Flows." Generally, the approach in SFAS No. 123(R)
is similar to the approach described in SFAS No. 123. However, SFAS
No. 123(R) requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the income
statement based on their fair values. Pro forma disclosure is no
longer an alternative. SFAS No. 123(R) must be adopted no later than
January 1, 2006. Early adoption will be permitted in periods in which
financial statements have not yet been issued. The Company expects to
adopt SFAS No. 123(R) on January 1, 2006. SFAS No. 123(R) permits
public companies to adopt its requirements using one of two methods:
o A "modified prospective" method in which compensation cost is
recognized beginning with the effective date (a) based on the
requirements of SFAS No. 123(R) for all share based payments
granted after the effective date and (b) based on the
requirements of SFAS No. 123 for all awards granted to employees
prior to the effective date of SFAS No. 123(R) that remain
unvested on the effective date.
o A "modified retrospective" method which includes the requirements
of the modified prospective method described above, but also
permits entities to restate based on the amounts previously
recognized under SFAS No. 123 for purposes of pro forma
disclosures either (a) all prior periods presented or (b) prior
interim periods of the year of adoption.
The Company plans to adopt SFAS No. 123(R) using the
modified-prospective method. The Company currently applies the
fair-value-based method of accounting for share-based payments in
accordance with SFAS No. 123. Currently, the Company uses the
Black-Scholes-Merton formula to estimate the value of stock options
granted to employees and expects to continue to use this acceptable
option valuation model upon the required adoption of SFAS No. 123(R)
on January 1, 2006. The Company does not anticipate that adoption of
SFAS No. 123(R) will have a material impact on its results of
operations, financial position or cash flows.
SFAS No. 154: In May 2005, the FASB issued FASB Statement No. 154,
"Accounting Changes and Error Corrections" (SFAS No. 154). SFAS No.
154 is a replacement of APB Opinion No. 20, "Accounting Changes" (APB
20) and FASB Statement No. 3, "Reporting Accounting Changes in Interim
Financial Statements" (SFAS No. 3). SFAS No. 154 provides guidance on
the accounting for and reporting of accounting changes and error
corrections. It establishes retrospective application as the required
method for reporting a voluntary change in accounting principle. APB
20 previously required that most voluntary changes in accounting
principle be recognized by including in net income of the period of
the change the cumulative effect of changing to the new accounting
principle. SFAS No. 154 provides guidance for determining whether
retrospective application of a change in accounting principle is
impracticable and for reporting a change when retrospective
application is impracticable. SFAS No. 154 also requires that a change
in method of depreciation, amortization, or depletion for long-lived,
nonfinancial assets be accounted for as a change in accounting
estimate that is effected by a change in accounting principle. APB 20
previously required that such a change be reported as a change in
accounting principle. SFAS No. 154 carries forward many provisions of
APB 20 without change, including the provisions related to the
reporting of a change in accounting estimate, a change in the
reporting entity, and the correction of an error. SFAS No. 154 also
carries forward the provisions of SFAS No. 3 that govern reporting
accounting changes in interim financial statements. SFAS No. 154 is
effective for accounting changes and corrections of errors made in
fiscal years beginning after December 31, 2005. The Company will adopt
this pronouncement beginning in fiscal year 2006.
(x) Reclassification of prior year balances: Certain minor
reclassifications have been made to the 2004 consolidated financial
statements to conform to the presentation in the 2005 consolidated
financial statements. An amount of $ 300, concerning deferred
financial expenses net of amortization, is now included in current
portion of long-term debt and long-term debt, previously included in
Deferred charges, net.
3. Transactions with Related Parties:
(a) Excel Management Ltd.: As of December 31, 2004, the operations of the
Company's vessels were managed by Excel Management Ltd., a corporation
which is controlled by the Company's Chairman of the Board of
Directors, Mr. Gabriel Panayiotides. Certain of the services provided
by Excel Management Ltd. were subcontracted to Maryville. The
management fees charged by Excel Management Ltd. during the years
ended December 31, 2003 and 2004 amounted to $260 and $270,
respectively and are separately reflected in the accompanying
consolidated statements of income for the years ended December 31,
2003 and 2004. The management agreement with Excel Management Ltd. was
initially due to expire on April 30, 2008 was terminated on March 2,
2005 with effect from January 1, 2005.
In exchange for terminating the management agreement mentioned above
and in exchange for a one time cash payment of $ 2,024, the Company
agreed to issue 205,442 shares no later than March 2, 2006 of its
Class A common stock to Excel Management Ltd. and to issue to Excel
Management Ltd additional shares at any time before January 1, 2009 if
the Company issues additional shares of Class A common stock to any
other party for any reason, such that the number of additional Class A
common stock to be issued to Excel Management Ltd. together with the
205,442 shares of Class A common stock to be issued to Excel
Management Ltd., in the aggregate, equal 1.5% of the Company's total
outstanding Class A common stock after taking into account the third
party issuance and the shares to be issued to Excel Management Ltd. To
date, the Company has not yet issued any shares to Excel Management
Ltd., neither the initial 205,442 shares nor the 92,961 anti-dilution
shares required to be issued as a result of the March 21, 2005 share
issuance to other third parties discussed in Note 9 (Note 15).
Furthermore, the Company has not yet received the one-time cash
payment from Excel Management Ltd. which is reflected as a reduction
of stockholders' equity in the accompanying 2005 consolidated balance
sheet. All shares to be issued will be subject to a two-year lock-up
from their date of issuance.
The fair value of the 205,442 Class A shares to be issued under the
termination agreement and the fair value of the anti-dilution
provisions (based on an independent valuation), totaled $ 6,987 which
has been credited to stockholders' equity. The excess of the fair
value of such shares over the cash consideration of $2,024 amounted to
$4,963 and is reflected as Contract termination expense in the
accompanying 2005 consolidated statement of income.
On March 4, 2005, the Company concluded a brokering agreement with
Excel Management Ltd. under which Excel Management Ltd. was appointed
as the Company's broker to provide services for the employment and
chartering of the Company's vessels, for a commission fee equal to
1.25% of the revenue of each contract Excel Management Ltd. has
brokered. The agreement was effective January 1, 2005 for an initial
period of one year and will be automatically extended for successive
one year periods, unless written notice by either party is given at
least one year prior to the commencement of the applicable one year
extension period. Commissions charged by Excel Management Ltd. during
the year 2005, amounted to $1,412 and are separately reflected in the
consolidated 2005 statement of income.
(b) Vessels under management: Maryville (Note 1) provides shipping
services to three related ship-owning companies at a fixed monthly fee
per vessel. Such companies are affiliated with the Chairman of our
Board of Directors and the revenues earned for the years ended
December 31, 2003, 2004 and 2005 totaled $527, $637 and $522,
respectively and are separately reflected in the accompanying
consolidated statements of income.
4. Inventories:
The amounts shown in the accompanying consolidated balance sheets are
analyzed as follows:
2004 2005
----------- --------
Bunkers 346 135
Lubricants 177 821
Victualling stores 35 138
----------- --------
558 1,094
=========== ========
5. Advances for vessels acquisitions:
The amount shown in the accompanying 2004 consolidated balance sheet
represents advance payments to the sellers of vessels Swift, Goldmar,
Isminaki, First Endeavour and Marybelle, due in accordance with the related
Memoranda of Agreement to acquire these vessels, which were concluded
during the last quarter of 2004. As of December 31, 2004, remaining
contracted payments for the above mentioned vessels, all due in 2005,
amounted to $86,335.
6. Vessels, net:
Vessel Accumulated Net Book
Cost Depreciation Value
-------- ------------- ----------
Balance, December 31, 2002 18,611 (2,023) 16,588
- Depreciation - (993) (993)
-------- --------- --------
Balance, December 31, 2003 18,611 (3,016) 15,595
- Depreciation - (980) (980)
-------- --------- --------
Balance, December 31, 2004 18,611 (3,996) 14,615
- Transfer from advances
for vessel acquisitions 26,220 - 26,220
- Vessels acquisitions 454,241 - 454,241
- Depreciation - (20,092) (20,092)
- Disposal due to sale (12,677) 3,361 (9,316)
-------- --------- --------
Balance, December 31, 2005 486,395 (20,727) 465,668
======== ========= ========
The Company's vessels, having total carrying value of $465,668 at December
31, 2005, have been provided as collateral to secure the bank loans
discussed in Note 8.
During the year ended December 31, 2005, the Company acquired sixteen dry
bulk carrier vessels for an aggregate consideration of $480,461. One
(vessel Powerful) of the above vessels, acquired for cash consideration of
$35,300, was under an existing time charter contract which the Company
agreed to assume through arrangement with the respective charterer. The
Company upon delivery of the above vessel and in accordance with its
accounting policy described in Note 2(l) evaluated the charter contract
assumed and concluded that the charter party was already carried at fair
value.
In addition, during the year ended December 31, 2005, vessels Petalis,
Lucky Lady, Fighting Lady and Almar I were sold for a total consideration
of $37,022, resulting in a gain of $26,795 (net of $907 of unamortized
dry-docking costs and $4 of unamortized financing costs written-off as at
the date of sale) which is separately reflected in the accompanying 2005
consolidated statement of income.
7. Deferred Charges, net:
The unamortized amounts included in the accompanying consolidated balance
sheets represent dry-docking and special survey costs, and are analyzed as
follows:
Balance, December 31, 2002 1,179
- Additions 951
- Amortization (555)
----------
Balance, December 31, 2003 1,575
- Additions 544
- Amortization (733)
----------
Balance, December 31, 2004 1,386
- Additions 1,747
- Amortization (622)
- Disposal due to sale (907)
----------
Balance, December 31, 2005 1,604
==========
8. Long-term Debt, net of deferred financing fees:
The amounts in the accompanying consolidated balance sheets are analyzed as
follows:
Borrower(s) 2004 2005
------- ------
(a) Becalm and Madlex 2,837 -
(b) Centel, Totrola and Storler 2,902 -
(c) Pisces, Liegh and Snapper 7,581 21,633
(d) Fianna, Whitelaw, Ingram, Teagan and Castalia - 88,312
(e) Fountain, Candy, Yasmine, Amanda, Marias,
Tanaka and Harvey - 144,540
(f) Barland - 8,331
-------- --------
Total 13,320 262,816
Less- current portion (7,704) (41,230)
-------- --------
Long-term portion 5,616 221,586
======== ========
Loan (a): Bank loan for an amount of $ 5,700, obtained in June 2002 for
working capital purposes. The outstanding balance of the loan at December
31, 2004 was fully repaid as of December 2005. Further to the principal
installments paid during the year, an amount of $1,488 was repaid in July
2005 due to the sale of the vessel Fighting Lady.
Loan (b): Bank loan for an amount of $5,500, obtained in October 2002 to
partially finance the acquisition cost of vessel Lady and for working
capital purposes. The outstanding balance of the loan at December 31, 2004
was fully repaid by October 2005, while earlier in March 2005 the balloon
installment amounting to $2,020 was paid from the sale proceeds of the
vessels Lucky Lady and Petalis.
Loan (c): Bank loan for an amount of $27,000, concluded in December 2004 to
partially finance the acquisition cost of vessels Goldmar, Swift and
Marybelle. The loan was drawn down in three tranches from December 2004
through March 2005. The amount outstanding at December 31, 2005 of $21,633
is repayable in 46 variable installments from January 2006 through March
2011 plus three balloon payments totaling $4,670 payable together with each
tranche's last installment. The loan bears interest at LIBOR plus a margin
and the average interest rate (including the margin) at December 31, 2005
was 6.35%.
Loan (d): Bank loan for an amount of $95,000, concluded in February 2005 to
partially finance the acquisition cost of vessels Isminaki, Birthday,
Emerald, First Endeavour and Princess I. The loan was drawn down in five
tranches from February 2005 through June 2005. The amount outstanding at
December 31, 2005 of $88,312 is repayable in 164 variable installments from
February 2006 through May 2015 plus two balloon payments totaling $8,370
payable together with the last installment of vessels Isminaki and Emerald
tranches. The loan bears interest at LIBOR plus a margin and the average
interest rate (including the margin) at December 31, 2005 was 5.74%.
Loan (e): Bank loan for an amount of $170,000, concluded in April 2005 to
partially finance the acquisition cost of vessels Elinakos, Happy Day,
Powerful, Renuar, Angela Star, Rodon and Fortezza. The loan was drawn down
in seven tranches from April 2005 through July 2005. The amount outstanding
at December 31, 2005 of $144,540 is repayable in 233 variable installments
from January 2006 through June 2016 plus seven balloon payments totaling
$34,480 payable together with the with each tranche's last installment. The
loan bears interest at LIBOR plus a margin and the average interest rate
(including the margin) at December 31, 2005 was 5.66%. An amount of $11,135
remained undrawn with an option to be draw down which expired as of
December 31, 2005.
Loan (f): Bank loan for an amount of $9,300, concluded in June 2005 to
partially finance the acquisition cost of vessel Attractive. The amount
outstanding at December 31, 2005, of $8,331 is repayable in 14 equal
consecutive quarterly installments, from February 2006 through May 2009
plus a balloon installment of $1,860 payable together with the last
installment. The loan bears interest at LIBOR plus a margin and the
interest rate (including the margin) at December 31, 2005 was 5.87%.
The loans are secured as follows:
o First priority mortgages over the borrowers vessels;
o First priority assignment of all insurances and earnings of the
mortgaged vessels;
o Pledge over the Company's bank accounts where payments for charters
are deposited by the charterers;
o Corporate guarantee of Excel Maritime Carriers Ltd.
The loans, among others, contain financial covenants requiring the Company
to ensure that the aggregate market value of the mortgaged vessels at all
times exceed 135% of the aggregate outstanding principal amount under the
loans, that total assets minus total debt will not, at any time, be less
than $150,000 and to maintain liquid funds of at least 10% of total debt.
As a result, restricted cash included in the accompanying 2005 consolidated
balance sheet represents bank deposits that are required under the loans
and are used to fund the loan installments falling due, as well as minimum
cash deposits required to be maintained with certain banks in accordance
with loan covenants. The Company is permitted to pay dividends under
certain conditions and for amounts as defined in the related loan
agreements.
Interest expense for the years ended December 31, 2003, 2004 and 2005
amounted to $395, $243 and $9,538, respectively and is included in interest
expense and finance costs in the accompanying consolidated statements of
income.
The annual principal payments required to be made after December 31, 2005,
are as follows:
2006 41,685
2007 31,937
2008 28,881
2009 27,112
2010 22,531
2011 and thereafter 112,360
--------------
264,506
Less- Financing fees (1,690)
--------------
262,816
==============
9. Common Stock and Additional Paid-In Capital:
The Company's authorized capital stock consists of (a) 49,000,000 shares
(all in registered form) of common stock, par value $0.01 per share (the
"Class A shares"), (b) 1,000,000 shares (all in registered form) of common
stock, par value $0.01 per share (the "Class B shares") and (c) 5,000,000
shares (all in registered form) of preferred stock, par value $0.1 per
share. The Board of Directors shall have the fullest authority permitted by
law to provide by resolution for any voting powers, designations,
preferences and relative, participating, optional or other rights of, or
any qualifications, limitations or restrictions on, the preferred stock as
a class or any series of the preferred stock. The holders of the Class A
shares and of the Class B shares are entitled to one vote per share and to
1,000 votes per share, respectively, on each matter requiring the approval
of the holders of common stock, however each share of common stock shares
in the earnings of the company on an equal basis.
In December 2004, the Company issued and sold 2,200,000 shares of Class A
common stock, registered under its shelf registration statement to
institutional investors at $25.00 per share. The net proceeds to the
Company totaled $51,451.
On March 21, 2005 the Company issued and sold 5,899,000 shares of Class A
common stock, registered under its shelf registration statement, to
institutional investors at $21.00 per share. The net proceeds to the
Company totaled $116,504.
Effective September 15, 2005, the Company's Class A shares are listed on
the New York Stock Exchange under the symbol "EXM".
10. Stock-based Compensation:
On October 5, 2004, the Company adopted a Stock Option Plan authorizing the
issuance and immediate grant of 100,000 options to purchase Class A common
shares (the "Plan") to the Company's Chief Executive Officer. Under the
terms of the Plan, all stock options granted vest on the third anniversary
of the date upon which the option was granted. The options expire on the
fifth anniversary of the date upon which the option was granted. The
exercise price of the options is the closing price of the Company's common
stock at the grant date, less a discount of 15%.
A summary of the Company's stock option activity is as follows:
Weighted-average
Shares exercise price
----------- ----------------
Outstanding at January 1, 2004 - -
Granted 100,000 31.79
Exercised - -
Forfeited - -
Expired - -
---------- ----------
Outstanding at December 31, 2004 100,000 31.79
========== ==========
Exercisable at December 31, 2004 - -
========== ==========
Weighted-average
Shares exercise price
----------- ----------------
Outstanding at January 1, 2005 100,000 31.79
Granted - -
Exercised - -
Forfeited - -
Expired - -
---------- ----------
Outstanding at December 31, 2005 100,000 31.79
========== ==========
Exercisable at December 31, 2005 - -
========== ==========
The weighted average grant-date fair value of the options granted was
$27.91. The weighted-average remaining contractual life of options
outstanding at December 31, 2005, is 3.76 years.
The fair value of options granted, which is amortized to the expense over
the option's vesting period, is estimated on the grant date using the
Black-Scholes option-pricing model.
The weighted average assumptions used in determining the fair value of
options granted in 2004 were:
Expected life of option (years) 3.5
Risk-Free interest rate 3.08%
Expected volatility of the Company's stock 112.75%
Expected dividend yield on the Company's stock 0.0%
During the years ended December 31, 2004 and 2005, the compensation expense
in connection with all stock-based employee compensation awards amounted to
$222 and $948, respectively and is included in General and administrative
expenses in the accompanying consolidated income statements for the years
ended December 31, 2004 and 2005.
11. Commitments and Contingencies:
Various claims, suits, and complaints, including those involving government
regulations and product liability, arise in the ordinary course of the
shipping business. In addition, losses may arise from disputes with
charterers, agents, insurance and other claims with suppliers relating to
the operations of the Company's vessels. Currently, management is not aware
of any such claims or contingent liabilities, which should be disclosed, or
for which a provision should be established in the accompanying
consolidated financial statements.
The Company accrues for the cost of environmental liabilities when
management becomes aware that a liability is probable and is able to
reasonably estimate the probable exposure. Currently, management is not
aware of any such claims or contingent liabilities, which should be
disclosed, or for which a provision should be established in the
accompanying consolidated financial statements. A minimum of up to $1
billion of the liabilities associated with the individual vessels actions,
mainly for sea pollution, are covered by the Protection and Indemnity (P&I)
Club insurance.
In 2001, Maryville entered into a lease agreement for the rental of office
premises with an unrelated party. The initial term of the lease agreement
was for one year and was renewable in successive one-year increments
through 2010 at Maryville's option after its initial term. In 2005,
Maryville entered into a new lease agreement (further amended in February
2006), for the rental of new office premises with an unrelated party. In
February 2006, the relocation of Maryville to its new offices was completed
and the 2001 lease agreement for the rental of the previous premises was
terminated. Based on the amended lease agreement, the term of the lease
will be for three years effective February 9, 2006 and the monthly rental
will be approximately $32 (Euro 27,000) adjusted annually for inflation
increase plus an additional 1.5%. Operating lease payments for the years
ended December 31, 2003, 2004 and 2005 amounted to $60, $70 and $107 and
are included in General and administrative expenses in the accompanying
consolidated statements of income.
12. Income Taxes:
Taxation on Liberian and Cyprus registered companies:
Under the laws of Liberia and Cyprus, (the countries of the companies'
incorporation and vessels' registration), the companies are subject to
registration and tonnage taxes, which have been included in Vessels'
operating expenses in the accompanying consolidated statements of income.
Cyprus does not impose a tax on international shipping income. With effect
from January 1, 2001 the Republic of Liberia enacted a new general income
tax act ("New Act"). In contrast to the income tax law previously in effect
since 1977 ("Prior Law"), which the New Act repealed in its entirety, the
New Act does not distinguish between the taxation of income of non-resident
Liberian corporations such as the Company and its Liberian subsidiaries,
who conduct no business in Liberia and were wholly exempted from tax under
Prior Law, and the taxation of ordinary resident Liberian corporations.
In 2004, the Liberian Ministry of Finance issued regulations pursuant to
which a non-resident domestic corporation engaged in international shipping
such as the Company will not be subject to tax under the New Act with
retroactive effect from January 1, 2001 (the "New Regulations"). In
addition, the Liberian Ministry of Justice issued an opinion that the New
Regulations were a valid exercise of the regulatory authority of the
Ministry of Finance. Therefore, if the New Regulations are enacted as law,
the Company believes that it and its Liberian subsidiaries will be wholly
exempt from Liberian income tax as under Prior Law and accordingly no
Liberian income tax charge has been provided in the Company's consolidated
income statement for the years presented.
Taxation on US source income:
Pursuant to Section 883 of the Internal Revenue Code of the United States
(the "Code"), U.S. source income from the international operation of ships
is generally exempt from U.S. tax if the company operating the ships meets
both of the following requirements: (a) the Company is organized in a
foreign country that grants an equivalent exception to corporations
organized in the United States and (b) either (i) more than 50% of the
value of the Company's stock is owned, directly or indirectly, by
individuals who are "residents" of the Company's country of organization or
of another foreign country that grants an "equivalent exemption" to
corporations organized in the United States (the "50% Ownership Test") or
(ii) the Company's stock is "primarily and regularly traded on an
established securities market" in its country of organization, in another
country that grants an "equivalent exemption" to United States
corporations, or in the United States (the "Publicly-Traded Test"). Under
U.S. Treasury regulations, a Company's stock will be considered to be
"regularly traded" on an established securities market if (i) one or more
classes of its stock representing 50 percent or more of its outstanding
shares, by voting power and value, is listed on the market and is traded on
the market, other than in minimal quantities, on at least 60 days during
the taxable year; and (ii) the aggregate number of shares of stock traded
during the taxable year is at least 10% of the average number of shares of
the stock outstanding during the taxable year.
Treasury regulations interpreting Section 883 were promulgated in final
form in August 2003. These regulations apply to taxable years beginning
after September 24, 2004. As a result, such regulations became effective
for calendar year taxpayers, like the Company, beginning with the calendar
year 2005. Liberia and Cyprus, the jurisdictions where the Company and its
ship-owning subsidiaries are incorporated, grant an "equivalent exemption"
to United States corporations. Therefore, the Company is exempt from United
States federal income taxation with respect to U.S.-source shipping income
if either the 50% Ownership Test or the Publicly-Traded Test is met.
For the year ended December 31, 2005, the Company determined that it does
not satisfy the Publicly-Traded Test on the basis that its shares are not
"regularly traded" because of the voting power held by its Class B shares.
In addition, the Company does not satisfy the 50% Ownership Test because it
is unable to substantiate certain requirements regarding the identity of
its shareholders. Since the Company does not qualify for exemption under
section 883 of the Code for taxable years beginning on or after January 1,
2005, its United States source shipping income will be subject to a 4% tax.
For taxation purposes, United States source shipping income is defined as
50% of shipping income that is attributable to transportation that begins
or ends, but that does not both begin and end, in the United States. As a
result, an amount of $311 was recognized in the accompanying 2005
consolidated income statement.
13. Voyage and Vessel Operating Expenses:
The amounts in the accompanying consolidated statements of income are
analyzed as follows:
Voyage expenses 2003 2004 2005
-------- -------- --------
Port charges 1,721 1,796 1,330
Bunkers 4,145 3,381 3,793
Commissions charged by third parties 1,446 2,923 6,570
-------- -------- --------
7,312 8,100 11,693
Commissions charged by a related party - - 1,412
-------- -------- --------
7,312 8,100 13,105
======== ======== ========
Vessel Operating Expenses 2003 2004 2005
-------- -------- --------
Crew wages and related costs 3,059 3,220 9,682
Insurance 966 1,181 3,003
Repairs, spares and maintenance 1,363 1,777 6,306
Consumable stores 930 1,077 4,615
Taxes 40 49 113
Miscellaneous 171 214 496
-------- -------- --------
6,529 7,518 24,215
======== ======== ========
14. Interest and Finance Costs:
The amounts in the accompanying consolidated statements of income are
analyzed as follows:
2003 2004 2005
--------- -------- --------
Interest on long term debt 395 243 9,538
Amortization and write-off of
financing costs 39 39 622
Bank Charges 39 81 99
--------- -------- --------
473 363 10,259
========= ======== ========
15. Subsequent Events:
(a) On February 9, 2006, the Company's Board of Directors granted the
Chairman of the Board 20,380 Class A or Class B shares at his option.
The market value of Class A shares on the grant date was $11.04 per
share. The Chairman requested and obtained an extension until May 15,
2006 to declare his election. Such granting was subject to the consent
of the majority of Class B shareholders who held more than 1,000 Class
B shares each. The company has duly notified the appropriate Class B
shareholders and the required consent has been granted.
(b) On March 2, 2006 based on an addendum to the original Management
Termination agreement concluded between the Company and Excel
Management, it was agreed that the period for the issuance of the
shares described in Note 3 is extended until March 2, 2007.
(c) On May 15, 2006, the Company's Board of Directors granted an
additional extension ot the Chairman of the Board until November 15,
2006 to declare his election as discussed in (a) above (unaudited).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EXCEL MARITIME CARRIERS LTD.
(registrant)
Dated: May 24, 2006 By: /s/ Christopher J. Georgakis
------------------------------
Christopher J. Georgakis
President and
Chief Executive Officer
SK 02545 0001 671949